The global fight against climate change will take centre stage this autumn when the UN Climate Change Conference (COP26) gets underway in Glasgow. The crucial meeting takes place just months after the UN’s Intergovernmental Panel on Climate Change (IPCC) issued a report described as “code red for humanity”, underlining the task facing current and future generations.1
Against such a backdrop, it’s easy to feel helpless – as if whatever we do isn’t enough. But if you’ve got any money in pensions and investments, there are steps you can take to make a real difference. That’s because every company you invest in through your investment and pension funds has a role to play in tackling climate change – and it’s your money that helps make sure they do just that.
Being the change
More and more people want to know that at least some of the money they invest is being used for good and isn’t helping finance companies that contribute to climate change, such as big polluters. As awareness of the effects of climate change has grown and the focus on company behaviour has sharpened, interest in investing responsibly has risen rapidly. Research in early 2020 found that 85% of investors see climate change as the biggest long-term threat and many have responded by beginning to move their money into greener assets.2
“There’s a rising interest in sustainability and the future of the planet. Our clients want to know their money is being invested in a way that’s responsible and sustainable,” says Sharon Bonfield, Propositions Manager at St. James’s Place Wealth Management. “Even if it’s just a small amount of money you want to invest, it could potentially be growing at the same time as making a difference to the world we’re living in.”
She points out that with an estimated £5.5 trillion set to pass between different generations over the next 30 years,3 there is an opportunity for older family members to think about their priorities for the future. “That £5.5 trillion could make a huge difference if invested responsibly,” she says.
Making it happen
The good news is that there are more ways than ever before to marry your investments with your values and your hopes for future generations. It’s not always easy to know how to invest, however, with a number of different approaches and an array of acronyms.
You’ll come across terms such as ethical investing, responsible investing and impact investing, for instance. It might help to think of those different approaches as sitting on a spectrum.
At one end, there are funds that concentrate on avoiding harm by excluding (or ‘screening out’) certain companies and industries (ethical investing). In the middle are strategies that integrate environmental, social and governance (ESG) factors into the investment decision-making process, while taking financial performance into account (responsible investing). Then there are the approaches that prioritise positive green outcomes over all else (impact investing).
At St. James’s Place, we believe responsible investing is the most effective way to maximise long-term value for our clients and create a world worth living in. And all our fund managers now apply ESG considerations to their investments, using it as a way of looking at the quality and the resilience of the companies they invest in. The result is that all our portfolios now align behind ESG principles – and are monitored for ESG compliance.
It makes sense from an investment perspective. Six out of ten sustainable funds delivered higher returns than equivalent conventional funds over the past decade, according to analysis by Morningstar.4
As Bonfield points out, there’s an argument that companies committed to sustainability are more likely to take a long-term view and prove more resilient. “Companies that are future proof are more likely to be successful, so that bodes well for their performance too,” she says.
For many people, responsible investing is a logical extension of the steps they already take to live sustainable lives. “If you want to know more,” says Bonfield, “our Partners are there to talk through this with you and help you understand how responsible investments can fit into your broader financial plans.”
Our world is changing faster than anyone predicted. We believe responsible investing has a huge role to play in shaping a better world and building a sustainable future.
Past performance is not indicative of future performance.
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
1 Secretary-General calls latest IPCC climate report ‘code red for humanity’, stressing ‘irrefutable’ evidence of human influence, UN, August 2021
2 Socially responsible investing predicted to double in 2021, Unbiased, April 2021 (Based on research by OnePlanet Capital, 2005 people surveyed)
3 Intergenerational wealth transfer in the UK, Kings Court Trust, 2020
4 Do sustainable funds beat their rivals?, Morningstar, June 2020